The rupee recovered from intraday low of 72.42 on dollar selling by state-run banks on behalf of the RBI. It hovered in a range of 72.42 and 71.67 before quoting at 71.83, down 48 paise at 4 pm local time.

Earlier in the day, the rupee and bonds fell sharply as Reserve Bank of India Governor Urjit Patel's unexpected resignation after market hours on Monday shocked investors. Concerns about crucial state election results also kept traders wary.

The benchmark 10-year bond yield was down 7 basis points on the day at 7.52 per cent after initially rising as high as 7.71 per cent.

Domestic markets recouped sharp early losses by mid-morning Tuesday as election results in three states were not as poor for the ruling party as some expected, but anxiety about the central bank governor's resignation kept the sentiment subdued.

Patel's resignation came after a month-long tussle over policy with the government that has raised concerns about the central bank's independence as a national election nears.

Government officials had been pressuring the RBI to allow some public sector banks laden with bad debt to lend more easily, and pushed for the central bank to hand over some of its surplus reserves to help fund the fiscal deficit.

Related Topics